Loan Insurance for lenders?

[rexcoin]

Lets say A Lender has a loan for a User - the User requests 100 bitcoins for example. The lender goes to to the lender insurance company, and tell them the user and how much the loan was for. The insurance company looks up the posts from the user and gives a insurance rate to the lender for 10%. Lender gives insurance company 10% (10 bitcoins) and the lender give 100 bitcoins to the user. the User cant pay for it at all - Insurance company now gives a percent of the defaulted loan to the lender.

While this doesnt make as much sense at first, maybe we can up it up on the insurance terms as this:
Lets say there are 10 users the lender has and only 1 defaulted loan, they can maybe pay 70% of the Defaulted Loan.

Maybe I am just making this confusing. But loans are sometimes not win - win situations. So i was thinking a insurance company would be a awesome idea for loans? yes you would lose 10 bitcoins if the user does pay, but i was tought to be safe then sorry.

What are your thoughts on this? and im using 10% as a example im sure others would go lowered and the insurance terms might be less then 70% but its up to the people.

So how is this a win-win situation?
Kinda not but its better then not getting paid ANYTHING?

lets say a insurance company gets 100 lenders and then the lenders have 25 users - the insurance company can make a pretty buck. and the lenders would be a bit safer? If i had the bitcoin startup capital i would so do this. But then again i dont know how insurance works 100%.

Any thoughts?

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[PatrickHarnett]

That is developing in the background.  (dealing with toxic loans and credit swaps)

[rexcoin]

That is developing in the background.  (dealing with toxic loans and credit swaps)

If i understood that right, you saying this is being worked on? we needed this or months, so hopefully it is released soon!

Thanks for responding to my thread

[copumpkin]

That is developing in the background.  (dealing with toxic loans and credit swaps)

If i understood that right, you saying this is being worked on? we needed this or months, so hopefully it is released soon!

Thanks for responding to my thread

I'm not sure anyone's actively working on it, but I wrote up a long blurb a week or two ago about credit default swaps (which can be used as insurance on your loans). The issue is really one of honesty. A shady borrower could take out a bunch of CDSes on himself (under false identities or using dishonest people) and then "default", thereby not only stealing the lender's money but forcing the insurer to pay out. It's insurance fraud, but proving that a "credit event" happened can be tricky. Usually you consider even late payments to be credit events, but there's a lot of subtlety that needs to be worked out.

I was hoping for some intelligent discussion about it (and credit ratings) but my threads didn't go very far

I'll probably write up a more detailed report of how I envision it working and post it in the next few days. It doesn't necessarily mean I'll be offering to sell/buy CDSes just yet, but I might eventually consider it once I get a better handle on things and we have a better notion of credit histories.

[PatrickHarnett]

How about "inactively thinking about it".  One of the early pieces is working out who would want to be in a group that supports such a product.  The lending market is still pretty young and small, and experience is building and rates becoming more firm - hence my putting something up for reference in the Starfish thread.

INAU made a suggestion a few days ago about the kujoking default that we are working on, and that might progress to a reasonable outcome, but it's a case of determining what works here for bitcoin.

[JusticeForYou]

Insurance is tricky.

Not to mention, an Insurer will have a process to file a claim and send out a 'Claims Agent.' After months of crossing the 't's' and dotting the 'i's', the claim might be denied or granted.


I would think the first step would be Co-Signing of a loan. In other words, another will vouch for a lender. If there is a default, that co-signer is on the hook for the loan.

I.E. If Bruce vouched for mybitcoins 'officially', he would be on the hook for the other 51% owed.